New York City Restaurant Closings: What's Going On?

The past few years haven’t been kind ones for many New York City restaurateurs.

Angelo & Maxie’s, Japonais, Tabla, and Convivio are just some of the restaurants that have been shuttered.

What’s going on and what’s coming next?

There’s always going to be a high failure rate in the restaurant industry, says Tom Kelley, managing partner, Concept Branding, San Diego.

“It’s a very competitive industry that's becoming more trendy every day. Margins are getting thinner, costs are going up, so it really is going to weed out those operators who do choose to dig in their heels to stay in business.”

The economic difficulties of the past few years have also had their effect, Kelley says, but what’s made a difference is that determination to succeed and stay the course seems to be lacking on the part of some restaurateurs, he explains.

“There's a prevailing view that it's OK to walk away from a lease or a real estate obligation. Years ago it was unheard of; it was a last resort. Now banks are perceived as the bad people and big leasing companies can absorb it. There's not the distaste that there once was.”

And chef-owners, he says, have a reluctance to reach out for help, especially regarding things they know little about, like marketing or inventory control, he says.

There’s also a breed of operators who thrive on the novelty of opening restaurants and not necessarily running them, Kelley says. “A lot of chefs like that thrill and the initial press.”

Frederick Lesort is an established New York City restaurateur, who despite 27 years of experience in the industry, was forced to shutter his two eponymous restaurants—on Madison Avenue and in the Meatpacking District—within weeks of each other in 2009.

Lesort didn’t close his restaurants without regrets.

“It’s a shame not only for the investors but also the people who work with you who rely on your for a paycheck every week. And I was fortunate to have people working for me for a long time—you have a bond with your dishwashers, your waiters, and so on. It’s difficult to shut down something you’ve put so much work into and have so much pride in.”

Lesort now has three restaurants, Plein Sud, a contemporary French brasserie at the chic Smyth Hotel in Tribeca, and Opia and Matisse uptown.

“I think the situation is a little better now than two years ago,” he says. “The difficulty in New York is that rents are high compared to the average in the country. When rents are so high, landlords are greedy and the moment you lose any business, the math becomes very difficult.

“Rent should not be much higher than 10% of your gross revenue. The moment it gets higher than 10% it becomes very difficult. And many [New York restaurants] have rents in the 12%, 13% range.”

To try to counter the situation, Lesort, and many other restaurateurs, he says, went to their landlords seeking to negotiate their rents. Most were unsuccessful.

“In New York there’s such demand for spaces that landlords have very little loyalty to their tenants. There’s always a big national brand that’s willing to come in and pay more,” he says.

“In every cycle there are different types of cuisine or different types of menu that attract,” she says, adding that these days, for every five closings, there are six openings, and it’s European chains like Prêt à Manger and Così that are proliferating.

She’s also seeing concepts from South America, Mexico and Spain, but believes that “Asian food has lost its glitter.”

Also on the uptick is family dining–even in New York City. Restaurants like Olive Garden and Sbarro fit in with the new “family” theme of Time Square. Consolo expects to see more of them, even further downtown around Union Square and up in Harlem.

“They are very sought after now because they build a nice unit, it’s very reasonable and they go across all socioeconomic classes,” she says.

And the landlords like them because their requirements don’t have a lot of issues —few venting issues, no smells, etc.—so they work in a residential or a commercial building.

“They can afford these spaces, they do all they do all of their own build-out, it’s very little hassle for the landlord and there’s a guarantee of business.”

And guarantee of business these days is very hard to argue with.

By Amanda Baltazar

News and information presented in this release has not been corroborated by FSR, Food News Media, or Journalistic, Inc.